Trademarks: Why SMEs should care and what might prevent them from registering their rights

The growing importance of IP

In an increasingly digitized world, the most valuable property might well be shifting from physical to intellectual. Intellectual property (IP) has become a key component and some of the most valuable assets start-ups and innovative small and medium enterprises (SMEs) may own. Data from the European Union Intellectual Property Office (EUIPO) suggests businesses that utilize IP rights (IPRs) perform better. This is especially true for SMEs; SMEs that own IPRs have 32% higher revenues per-employee than SMEs that do not have any IPR. To further emphasize this point, the EUIPO’s data emphasizes that the highest revenue-per-employee increases are linked to trademark-only and combined trademark design owners.

So, the data strongly suggest that it is a smart idea for SMEs to concern themselves with IP rights, particularly trademarks. Yet at the same time, the EUIPO data reveals that few SMEs make use of their IP rights in the EU. Instead, large companies are taking the lead in registering their IP rights, which they do at a staggering rate of four times of that of SMEs.

But why do SMEs shy away from IP law?

Well, there are a few possible explanations.

1. Legal Awareness

First, many SMEs simply don’t have the appropriate legal awareness.Lack of knowledge about IP law and its benefits were the main reasons why those SMEs without registered IP rights refrained from registering their rights. (Dahan S., Zhu X., Bambhoria R., Townsend S., EU Courts and Data Science: The Case of Trademark Likelihood of Confusion in Pereisin, Capeta (Hart Publishing, forthcoming 2020))

2. The Price Tag

Second, many SMEs are discouraged by the complexity of the procedure, and legal costs attached to protecting their IP rights. To illustrate, a European SME might have to pay for: (a) conducting an availability search; (b) providing an assessment of similarity with other trademarks; (c) drafting a corresponding legal opinion; (d) classifying the goods and services covered by the trademark according to the Nice Classification System; and (e) and filing an appropriate application with the EUIPO.

Legal fees in Europe range from €250-499 per hour, with the average cost of a comprehensive trademark search for a single trademark is around €1,300. A full, wide-sweeping global search is exponentially higher and can cost upwards of around €30,000. Therefore, the financial cost attached to beginning a trademark claim, and then subsequently protecting it is often too high a burden to bear, especially for small businesses and start-ups who have a limited budget and resources to begin with.

That being said, once an enterprise has grown to more than 250 employees, sophisticated and expensive legal services or even in-house counsel are common expenses. However, SMEs are understandably hesitant to employ expensive legal services, which could jeopardize the longevity of the company.

Disclaimer: The information provided in this response is for general informational purposes only and is not intended to be legal advice. The content provided does not create a legal client relationship, and nothing in this response should be considered as a substitute for professional legal advice. The information is based on general principles of law and may not reflect the most current legal developments or interpretations in your jurisdiction. Laws and regulations vary by jurisdiction, and the application and impact of laws can vary widely based on the specific facts and circumstances involved. You should consult with a qualified legal professional for advice regarding your specific situation.

Information sourced from Prof. Samuel Dahan, MA (Sorbonne-Ecole Normale Supérieure Ulm)LLM (Leuven)PhD (Cambridge)